Derivatives industry says Fed's capital-reduction plan doesn't do enough to encourage clearing

18 June 2018 7:25am
The derivatives industry is arguing that an already contentious US Federal Reserve proposal to reduce banks’ capital requirements wouldn’t go far enough to encourage firms to clear derivative contracts for traders.

The Futures Industry Association, including the largest derivative traders, as well as the CME Group and Intercontinental Exchange, the biggest US clearinghouses, said that the Fed’s supplementary leverage ratio plan could lead to continued bank exits from the clearing business.

“Unfortunately, if the proposal is adopted in its current form, the goal of the Group of 20 nations to incentivize central clearing will not be fully realized because the availability of client clearing will be reduced,” the clearinghouses’ recent letter said.